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Going to Market - Consumer law update - April 2016

Contents Commerce Commission 1 Advertising Standards Authority 2 Banking Ombudsman 3 Privacy Commission 3 Cases 3 Australian Securities and Investment Commission 4 United Kingdom Competition and Markets Authority 5 Contacts 5 1 | April 2016 G ing to Market Consumer law update Commerce Commission Payday lenders under scrutiny as Cash in a Flash refunds over $100,000 The Commerce Commission is reviewing compliance with the Credit Contracts and Consumer Finance Act 2003 (CCCFA) by high cost/short term lenders such as payday lenders. The project was announced as payday lender Cash in a Flash amended its contracts and refunded customers a total of $122,365 on advice from the Commerce Commission that its consumer credit contracts were unlikely to comply with the CCCFA. Link: Media release Jetstar ends “opt-out” pricing Jetstar has undertaken to stop using pre-ticked boxes for additional services such as seat selection, checked baggage, and travel insurance when selling air tickets online. The Commerce Commission said that preselecting optional extra services during an online sales process could mislead consumers over the price of the product or service they are buying, and it had been prepared to take court action against the airline. Jetstar follows several New Zealand businesses which have ended the use of “opt-out” pricing since 2015, after Commerce Commission activity. Link: Media release Going to Market is a monthly publication tracking developments in consumer legislation, regulation and case law. The risks for organisations from breaching consumer law are high with increased penalties, new fair trading and consumer credit regimes and more intensive regulatory activity. Our team of consumer law specialists can assist you in all areas of consumer law, including advice on product liability and recall, compliance programmes, contracts review, defending regulatory investigations and prosecutions as well as commercial litigation focusing on consumer law. Contents Commerce Commission 1 Advertising Standards Authority 2 Banking Ombudsman 3 Privacy Commission 3 Cases 3 Australian Securities and Investment Commission 4 United Kingdom Competition and Markets Authority 5 Contacts 5 2 | April 2016 G ing to Market Consumer law update Commerce Commission investigation into steel mesh stretch test Brilliance Steel Ltd and Euro Corporation Limited have withdrawn some steel mesh products after Commerce Commission testing showed that they did not meet the New Zealand/Australia standard for ductility – designed to ensure the steel can stretch under pressure or movement, such as an earthquake. One company has challenged the test results and the Commission has agreed to undertake further tests with experts. Misrepresenting that a product complies with a standard when it does not is a breach of the Fair Trading Act 1986, for which companies can be fined up to $600,000 per offence. Link: Media release Steel & Tube defends mesh strength despite laboratory testing confusion The Commerce Commission has also turned its attention to Steel & Tube, following the revelation that the company has been testing its steel mesh in-house despite test certificates attributing the work to a respected independent laboratory. The company explained that the logo of accredited laboratory Holmes Solutions had been inadvertently left on test certificates after it helped Steel & Tube develop a testing regime four years ago. The “laboratory manager” who signed the certificates was in fact a manager of one of Steel & Tube’s Auckland factories. Steel & Tube said it was fully confident that the mesh complied with standards. In-house testing can be a valid way of complying with the relevant standard, but misleading representations – such as a claim that a product was tested by an independent company – are prohibited under the Fair Trading Act. Link: Radio New Zealand report Genesis Energy’s promise of “unlimited” gas under review The Commerce Commission is reviewing Genesis Energy’s “unlimited” gas plan for the risk that it might mislead consumers. Genesis’ plan offers “unlimited” gas for $159 a month, but is subject to a “fair use” clause. The Commerce Commission has previously warned telecommunications companies about the risks of using terms like “unlimited” in advertising. If the overall impression is misleading, such advertising could breach the Fair Trading Act regardless of what is provided in the small print. Link: Stuff.co.nz report Advertising Standards Authority Samsung advert misleads over Spotify, disclaimer insufficient The Complaints Board has upheld a complaint that Samsung’s website advertisement for its 55” Full HD Flat Smart TV J5500 Series 5 was likely to mislead consumers into believing the Spotify app was available on the television. The advertisement included images of available apps, including Spotify. It also contained a disclaimer that screen images were representations only and that actual interfaces may differ. The ASA considered that the disclaimer, which appeared at the bottom of the page in small type, was not prominent or clear enough. The ASA noted that a television was often a significant financial purchase and advertisers had a responsibility to ensure marketing was not misleading. Link: ASA decision Contents Commerce Commission 1 Advertising Standards Authority 2 Banking Ombudsman 3 Privacy Commission 3 Cases 3 Australian Securities and Investment Commission 4 United Kingdom Competition and Markets Authority 5 Contacts 5 3 | April 2016 G ing to Market Consumer law update Banking Ombudsman Irresponsible lending complaint – granting request for increased credit card limit A customer with a bank-issued credit card complained to the Ombudsman after she increased her credit limit twice but could then no longer meet repayments after leaving her job due to illness. The Ombudsman queried why the bank had allowed the credit limit increase when it knew – from her other bank accounts – that the customer’s income had decreased. The Ombudsman considered that this suggested the bank had breached the Responsible Lending Code (the Code). In this case, the customer accepted an offer from the bank to clear all interest and charges on the account and enter into a repayment arrangement. Link: Banking Ombudsman Privacy Commission Local government online property and building information report The Privacy Commission has released a report into the privacy implications of online publication of local government property and building information, noting that the more than 100 complaints it has received have highlighted privacy, safety and security risks relating to stalking, harassment, and domestic violence. Councils must inform individuals at the point of collection how their personal information is published, protected, used, and stored. The Commission has also recommended that online records should prevent bulk-downloads, and allow people to opt-out of online publication where appropriate. Link: Privacy Commission report Cases Australian Courts US company Valve subject to Australian consumer laws The Federal Court has found that an offshore company operating in Australia online is subject to Australian consumer laws. Although Valve Corporation (Valve) is based in the US, the Court found that, in making representations to Australian consumers, it engaged in conduct in Australia – and, in any event, by supplying software online it was carrying on business in Australia. Consequently, Valve had made false or misleading representations to Australian consumers about their rights under Australian consumer law when it purportedly excluded or modified statutory guarantees about goods being of acceptable quality. The decision reinforces that foreign based businesses selling goods and/or services to Australian consumers can be subject to Australian consumer laws. Link: ACCC media release Federal Court penalises Chrisco $200,000 for misleading customers on layby plan Chrisco Hampers Australia Ltd (Chrisco) has been ordered to pay a $200,000 penalty for misleading customers between January 2011 and December 2013 by informing them that they could not cancel their layby agreement after making their final payment. Under the Australian Consumer Law, consumers have a right to cancel a layby agreement at any time prior to delivery of the goods, including after paying their final installment. Contents Commerce Commission 1 Advertising Standards Authority 2 Banking Ombudsman 3 Privacy Commission 3 Cases 3 Australian Securities and Investment Commission 4 United Kingdom Competition and Markets Authority 5 Contacts 5 4 | April 2016 G ing to Market Consumer law update The Court also found the 2014 “HeadStart Plan” contained an unfair term contract term, which required the consumer to “opt-out” of further payments once they had fully paid for their layby order, and otherwise allowed Chrisco to continue to take payments by direct debit. In 2012 the New Zealand District Court fined Chrisco Hampers Limited $175,000 for misleading customers about their cancellation rights under the Layby Sales Act. Link: ACCC media release Australian Securities and Investment Commission ANZ to refund $5 million for incorrect late payment and over limit fees ANZ will refund approximately $5 million in fees after it charged incorrect late payment and over limit fees to some 25,000 customers over a nine year period. The affected customers held an ANZ Access Basic account, a product designed for low income customers who are unable to pay high fees. But the fee waivers and discounts were not properly applied, following what ASIC described as “breakdowns in the interaction between automated and manual processes”. ANZ reported the matter to ASIC under its breach reporting obligations under the Corporations Act. Link: ASIC media release Regulatory action – responsible lending laws ANZ pays $212,500 for breaching responsible lending laws Australia and New Zealand Banking Group (ANZ) has paid penalties of $212,500 after an ASIC investigation found the bank’s “ANZ Assured” overdraft facility breached responsible lending laws. Between November 2014 and January 2015, ANZ sent written offers to certain customers inviting them to enter into an overdraft facility with a specified limit of either $500 or $1,000 – with only limited options for customers to select an alternative overdraft amount. ASIC found that ANZ was in breach of its obligations under the National Consumer Credit Protection Act 2009 to make reasonable inquiries about the credit limit a consumer requires. The legislation is designed to ensure that consumers do not take on unmanageable debt. Link: ASIC media release Payday lender Nimble to refund $1.5 million following responsible lending investigation Payday lender Nimble Australia Pty Limited (Nimble) has agreed to refund over 7,000 customers more than $1.5 million after ASIC identified deficiencies in the lender’s compliance with Australia’s responsible lending laws. ASIC found that Nimble: • had not properly assessed the financial circumstances of many customers before providing them with loans • failed consistently to recognise where consumers had obtained repeat loans from payday lenders within a short period of time, and • failed to make proper inquiries of consumers’ requirements and objectives. Contents Commerce Commission 1 Advertising Standards Authority 2 Banking Ombudsman 3 Privacy Commission 3 Cases 3 Australian Securities and Investment Commission 4 United Kingdom Competition and Markets Authority 5 Contacts 5 5 | April 2016 G ing to Market Consumer law update ASIC confirmed that responsible lending laws are a high priority across Australia’s credit industry, not just in payday lending, as they are key consumer protection provisions. Link: ASIC media release United Kingdom Competition and Markets Authority UK watchdog takes action over fake online reviews The CMA has taken enforcement action against search engine optimisation and online marketing company Total SEO & Marketing Ltd (Total SEO) for writing more than 800 fake positive reviews for 86 small businesses, published across 26 different websites between 2014 and 2015. It is a prohibited practice under the Consumer Protection from Unfair Trading Regulations to falsely represent oneself as a consumer or engage in other misleading and aggressive commercial practices. Total SEO and its directors have undertaken to the CMA that they have ceased the practice and will take steps to remove the fake reviews already posted. The CMA has issued guidance for businesses on how to comply with consumer protection law in relation to online reviews, noting that more than half of people in the UK use online reviews to help them choose to what to buy. Link: CMA media release Contacts VICTORIA HEINE – PARTNER T: +64 4 498 6327 M: +64 27 561 3707 E: victoria.heine@chapmantripp.com TIM SHERMAN – SENIOR ASSOCIATE T: +64 4 498 2400 M: +64 27 345 3250 E: tim.sherman@chapmantripp.com KELLY MCFADZIEN – PARTNER T: +64 9 357 9278 M: +64 27 473 2230 E: kelly.mcfadzien@chapmantripp.com SARAH QUILLIAM-MAYNE – SENIOR SOLICITOR T: +64 4 498 6307 M: +64 22 136 2601 E: sarah.quilliam-mayne@chapmantripp.com

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